Employing Someone to Provide Care at Home
Arranging care at home for a parent or a spouse frequently means hiring somebody directly rather than through an agency. It is usually cheaper per hour and it makes you an employer, with payroll taxes, filings and obligations that nobody mentions when the arrangement is made. The costs are manageable; discovering them two years later is not.
- Control decides it:: If you set the hours, the tasks and the method, the worker is generally an employee.
- A wage threshold triggers it:: Social Security and Medicare obligations begin once cash wages for the year pass a set amount.
- The employer share is real:: You owe your own half of Social Security and Medicare on top of the wages, plus unemployment tax.
- An agency changes everything:: A worker employed by an agency is the agency's employee, not yours.
Where the AI summary above gets this wrong
"Pay the carer as a contractor and give them a 1099."
That's surface-true. Here's what it misses:
- The classification follows control, not the paperwork — Issuing a form does not make someone a contractor. Where you decide the hours, the tasks and how they are done, and you supply the setting and equipment, the worker is an employee. Getting it wrong exposes the household to back taxes, interest and penalties, and it removes the worker's own protections.
- The obligations reach further than income tax withholding — Income tax withholding is optional for a household employee unless both parties agree. Social Security and Medicare are not, once wages pass the threshold, and federal unemployment tax applies separately at a lower level. Most states add their own unemployment and, in some cases, disability requirements.
- Some of the cost may be a deductible medical expense — Where the care is for someone who is chronically ill and it is provided under a plan of care, the portion attributable to nursing-type services can be a deductible medical expense. The employer taxes on those wages can count too, which for a household already itemising medical costs is worth documenting from the start.
01 Employee or contractor
The distinction is about control. A household employee is someone whose work you direct — what is done, when, and how. A genuine independent contractor controls their own methods, typically serves several clients, and supplies their own tools.
A carer who comes to your home on a schedule you set, doing tasks you specify, using your kitchen and your equipment, is almost always an employee. That is true whether they work full time or a few hours a week, and it is not changed by an agreement saying otherwise.
Where the worker is employed by an agency that assigns them, pays them and can replace them, they are the agency's employee. That is the cleanest route administratively and it is priced accordingly — the difference in hourly rate is largely the cost of the obligations you would otherwise carry.
Source: Publication 926
02 What an employer owes
Once cash wages to a household employee pass the annual threshold, Social Security and Medicare taxes apply. Half is withheld from the worker and half is the employer's own cost. Federal unemployment tax applies separately once wages in a quarter exceed a lower figure.
Withholding income tax is optional unless both parties agree to it, though agreeing is usually kinder to the worker than leaving them with a bill. The employer reports the wages annually and provides the worker with a wage statement.
States add their own layer: unemployment insurance almost everywhere, and in some places disability insurance or workers' compensation. Payroll services exist for exactly this and cost a modest amount a month, which for most families is worth it against the risk of getting the filings wrong.
Shows: the employer's own share of payroll taxes on household wages, on top of what is paid to the worker. Ignores: the employee's share that must be withheld and remitted, state unemployment and disability taxes, workers' compensation, and any payroll service fees.
Source: Self-employment tax
03 When the cost is deductible
Care that is medical in nature can be a deductible medical expense. Where a person is chronically ill and the services are provided under a plan of care prescribed by a licensed practitioner, the portion of the wages attributable to nursing-type services generally qualifies.
Purely household work — cooking for the household generally, cleaning, driving — does not. Where a carer does both, the cost should be apportioned, and doing that contemporaneously with a record of duties is far easier than reconstructing it.
Medical expenses are deductible only above a percentage of adjusted gross income and only if you itemise, which after the higher standard deduction most retirees do not — but a year with substantial care costs is exactly the year that clears both hurdles, and the documentation discipline is the same either way.
Source: Publication 502
Families arrange this at a difficult moment and almost never think of themselves as employers, which is understandable and expensive. If you are hiring someone directly to help a parent, budget for the wages plus roughly another ten per cent, and use a payroll service from the first payment. It costs a few hundred dollars a year, it protects the person doing the caring, and it removes a problem that otherwise surfaces at the worst possible time.
FAQ
Is a carer I hire directly an employee?
Generally yes, if you control what work is done, when and how. Issuing a contractor form does not change the classification, which follows the facts of the working relationship.
What taxes do I owe as a household employer?
Social Security and Medicare once cash wages pass the annual threshold, with half withheld and half your own cost, plus federal unemployment tax above a lower quarterly figure. Most states add unemployment requirements of their own.
Can I deduct the cost of in-home care?
The portion attributable to nursing-type services for a chronically ill person under a plan of care can be a deductible medical expense, subject to the income floor and only if you itemise.
Sources
Regulator references
- Publication 926 · Internal Revenue Service · 2026Who is a household employee, the wage threshold, and the taxes an employer owes.Last verified: 2026-09-07
- Self-employment tax · Internal Revenue Service · 2026The alternative treatment when a worker is genuinely self-employed.Last verified: 2026-09-07
- Publication 502 · Internal Revenue Service · 2026When the cost of in-home care is a deductible medical expense.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
Run this rule against your situation
See what this rule does to your own projection — month by month, to age 90.
Join the Waitlist
Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.